Many focus on keeping premiums down, but that can backfire

Since the next Obamacare enrollment period starts Nov. 1 and employers are rolling out health plan open enrollment for employees, the panel I just attended — Consumers React to Rising Health Costs: Affordable Care Act Update — couldn’t be timelier.

The panel, part of the Society of American Business Editors and Writers (SABEW) Fall Conference in New York City, featured three authorities: Sara R. Collins, vice president for health care coverage and access at The Commonwealth Fund, a nonpartisan health research foundation; Dan Mangan, health care reporter for CNBC.com; and David Nather, Washington editor of STAT, a new Boston Globe Media publication on health, medicine and scientific discovery.

“Health care costs continue to go up and confused consumers still don’t know what plan to choose,” said panel moderator Marty Steffens, SABEW chair in business and financial journalism at the University of Missouri.

As I noted in my recent Next Avenue post, “Is Obamacare Becoming the Unaffordable Care Act?,” a combination of Obamacare’s incentives to reduce health care premiums; the rise of so-called “consumer-driven” and high-deductible health plans and employers’ moves to combat the Affordable Care Act’s (ACA) coming “Cadillac tax” (a 40 percent excise tax on benefits over a certain threshold) has led rising numbers of Americans to become underinsured.

The Commonwealth Fund defines the underinsured as insured people whose out-of-pocket costs — excluding premiums — equal 10 percent or more of household income (5 percent or more for the low-income) or whose deductibles equal 5 percent or more of household income. Commonwealth says 23 percent of insured people between 19 and 64 are now underinsured, twice the percentage in 2003.

Now that I’ve set the table, let me tell you about four morsels from the panel:

The percentage of the public whose deductibles are high relative to their income has been rising every single year.

— Sara R. Collins, The Commonwealth Fund

The upcoming Obamacare open enrollment season will be far less tumultuous than the first one. “The Affordable Care Act is more established now and we’re done with threats like the Supreme Court,” said Nather. “Most everyone accepts that it will be here to stay.”

Certain provisions, such as guaranteed coverage for children of employees until age 26, have become very popular, the panelists noted. “Millions got coverage [through Obamacare] and the satisfaction levels with the plans are really high,” said Collins.

Nather added that the “firestorm” is over of policyholders learning that their coverage would be cancelled because it didn’t meet the federal requirements.

All of this “will make it difficult politically to uproot the law by root and branch,” said Mangan. “No one would argue it’s a perfect plan. But it’s there and it’s a lot harder to take it away now.”

That said, Republican presidential candidate Jeb Bush just unveiled his Obamacare “repeal and replace” plan with tax credits and an emphasis on both Health Savings Accounts and state government control. His rivals Sen. Marco Rubio and Gov. Bobby Jindal have also come out with their own Affordable Care Act alternatives.

Incidentally, The New York Times reports that the Obama administration plans to improve the HealthCare.gov site in time for Obamacare open enrollment with “decision support tools.” The site will let shoppers search for plans that include their doctors, preferred hospitals and their prescription drugs by helping them predict their health care costs for the year ahead.

Americans feeling the most painful health care pinch are those whose health plan deductibles are high relative to their income. While the overall health care inflation rate has slowed lately, the percentage of the public whose deductibles are high relative to their income “has been rising every single year,” Collins said.

A new Aflac survey found that 46 percent of employees selected a major medical/health insurance plan with a high deductible of $1,000 or more last year, up from 34 percent in 2014. The April 2015 Truven Health MarketScan said 64 percent of large employers now offer one or more consumer-driven health plans and 76 percent plan to in the future.

And those high deductibles are leading some to avoid medical care.

In The Commonwealth Fund’s surveys, 40 percent of people with high deductibles relative to their income said that as a result, they hadn’t gone to the doctor when they were sick, didn’t get follow-up tests recommended by their doctors and didn’t go to specialists when necessary.

“Troublingly, they also didn’t get preventive care services,” said Collins. “But preventive services are free with the Affordable Care Act. That shows the level of confusion people have about what’s covered and what’s not covered.”

High-deductible plans will only become more common from employers, Collins predicted. “I heard this week that a large number of employers are thinking of moving exclusively to high-deductible plans,” she said. “So then you’ll have no choice as an employee. That will be your plan.”

When deciding which health plan to sign up for — on Obamacare exchanges and through employers — people are overly focused on the cost of premiums. As a result, they’re picking plans with the lowest premiums — even if that means going with ones that have the narrowest choices of doctors.

Similarly, the Aflac survey found the monthly premium was the most important factor employees now consider when selecting their major medical health insurance plan.

“One way insurers try to hold premiums down with ACA is to structure plans so there are more out-of-pocket costs,” said Nather. “You can avoid those costs by paying more in premiums, but that’s a terrible trade-off to have to make.”

Collins noted that half of those choosing an Obamacare plan on an exchange picked a limited-provider network in exchange for a lower premium. However, “out-of-network costs can be pretty astronomical,” said Steffens.

Going with a low-premium plan can actually penalize low-income Americans. By choosing one of these Bronze plans, they give up the ability to receive federal subsidies offered to low-income people who select Silver plans, the next level up in coverage and cost.

Unaffordable premiums have been a key factor in the 15 percent drop in the number of Americans now enrolled in federal and state health care marketplaces, according to an article in The New York Times this week. The Times said roughly 9.9 million people were enrolled in the marketplaces at the end of June, down from 11.7 million who chose plans during the open enrollment period ending in February.

Consumers will see more examples of soaring costs for specialty drugs. Turing Pharmaceuticals and its reviled CEO Martin Shkreli were lambasted when the company hiked the price of its Daraprim pill by 5,000 percent. (Shkreli has since said he won’t increase it as much as planned, but hasn’t said what the new price will be. Last week, a Business Insider reporter learned a 30-day supply now costs $27,000 at her local pharmacy.)

“What Shkreli did was not unusual in the pharma business,” said Mangan, particularly for existing drugs with small patient populations that are “a captive audience.”

He noted that last year a new Hepatitis C specialty drug came out with an $84,000-a-year price tag. And if two new cholesterol-control drugs become widespread, Mangan said, “that would be $150 billion in extra costs alone, eventually.”

Mangan told the audience: “Something has to be done. That doesn’t mean something will be done.”

Proposing a way to tame drug prices will be tricky for Republicans running for President, said Nather. “Anything that sounds like price controls is off the table for them,” he said. “But drug costs are one of the most visible examples of rising prices, since they hit people in the pocket.”